Texas says it will not regulate digital currencies as money In what could be an interesting test case for America’s federal system as Washington looks to establish a regulatory framework for digital currencies, Texas banking regulators have drawn up statewide rules that will not regulate such currencies as money.
In a memo sent out last week, Texas Banking Commissioner Charles G. Cooper said that cryptocurrencies will not be treated in his state as sovereign currencies or legal tender. Texans, then, will be free to buy them, sell them, and use them to buy goods and services free of regulation.
The highlights:
An exchange of cryptocurrencies — even from one to another — does not constitute money transmission.
Exchanging a cryptocurrency as a promise to fulfill an obligation at a later time also does not constitute money transmission.
Holding a crytocurrency on behalf of another is also not money transmission.
Trading a cryptocurrency for sovereign legal tender such as US dollars through an exchange (the memo cited Mt. Gox specifically) is money transmission, and the exchange must comply with relevant regulations.
An ATM that relies on a third party to handle an exchange is subject to money transmission laws; however, if the ATM operator never involves a third party for the exchange, then this does not constitute money transmission.
A digital currency, Cooper wrote, “does not entitle its owner to anything, and creates no duties or obligations in a person who gives, sells, or transfers it. There is no entity that must honor the value of a cryptocurrency … The only way to convert a unit of cryptocurrency to sovereign currency is to find a willing buyer. Therefore, cryptocurrencies as currently implemented cannot be considered money or monetary value under the [Texas] Money Services Act.”
The memo continued:
“Because cryptocurrency is not money under the Money Services Act, receiving it in exchange for a promise to make it available at a later time or different location is not money transmission. Consequently, absent the involvement of sovereign currency in a transaction, no money transmission can occur. However, when a cryptocurrency transaction does include sovereign currency, it may be money transmission depending on how the sovereign currency is handled. A licensing analysis will be based on the handling of the sovereign currency.”
The memo does note that Bitcoin business do need to comply with FinCEN licensing requirements if they qualify under the federal definitions of a money transmitter.